Trade creates growth by creating efficiencies and increasing the range of available goods and services, former World Trade Organization chief Pascal Lamy told students on February 13. But that growth is accompanied by wrenching economic shifts that must be mitigated domestically by social welfare, education, and other programs.
“Open trade reshuffles economic and social fabrics,” he said. “It works because it’s painful and it’s painful because it works.”
Lamy was director-general of the WTO from 2005 to 2013, and previously served as a trade negotiator and administrator in the French government and for the European Commission. He spoke as part of the Colloquium on Business and Society, in an event co-sponsored by the student Business and Politics Club.
Early in his career, Lamy said, the main barriers to international trade, and the subject of trade negotiations, were tariffs and other measures protecting local producers from competition. In what he called “the new world,” goods and services are produced in multiple countries, and constraints on selling goods worldwide come chiefly from the costs of adapting processes and products to comply with the regulations and standards of multiple countries. As a producer selling goods globally, he said, “a large part of my comparative advantage can be eaten up” by such costs.
Today, as a result, the most important trade negotiations are those that concern the convergence of product standards and safety regulations, such as the proposed Transatlantic Trade and Investment Partnership, which would bring regulations in the U.S. and EU into accord in a number of sectors.
Such regulatory convergence should bring greater protection for consumers and the environment, Lamy said, since it is cheaper to produce goods according to a single standard, even if that standard is more stringent, than to adhere to multiple standards. “In theory, this new world addresses lots of problems that the old world had,” he said.
Watch the event: